One of the four cases cases being argued at the Federal Circuit in March that attracted amicus briefs is Bruyea v. United States, a tax case. In it, the United States is appealing a decision by the Court of Federal Claims, which allowed an American citizen residing in Canada to claim a foreign tax credit. This is our argument preview.
In its opening brief, the United States argued it “taxes its citizens on their worldwide income,” though the “Internal Revenue Code has long contained provisions aimed at reducing double taxation.” To achieve the goal of reducing double taxation, the United States explained, the Code “generally allows a foreign tax credit against U.S. income taxes.” The United States, however, said the “credit can only be applied against certain types” of income taxes. In particular, the tax treaty between Canada and the United States “does not authorize a foreign tax credit against the net investment income tax” governed by the Code. The United States argued the lower court’s holding that Bruyea could claim a tax credit in that situation “is at odds with every court to have examined the identical language” found in similar treaties.
In his response brief, Bruyea argued tax treaties between Canada and the United States have been in place for “over 80 years,” and the “primary goal” of these treaties is “preventing double taxation of the same income.” Bruyea argued the lower court “correctly interpreted the text of the Canada treaty” and allowed it to “achieve its avowed aim of avoiding double taxation.” Bruyea further contended that a “reading to the contrary” would “violate[ ] basic rules of textual interpretation.”
In its reply brief, the United States argued “Bruyea’s defense” of the lower court’s decision “rests on the same atextual interpretation” of the Treaty’s article adopted by the lower court. The United States explained the “fact that the signatories” in subsequent paragraphs “expressly agreed to certain benefits” does not provide “grounds to distort the plain meaning” of the Treaty. While the United States agreed the “Treaty was designed to reduce double taxation through a foreign tax credit,” the government argued “the signatories—by careful design . . . never intended to eliminate all double taxation.”
An amicus brief was filed by H. David Rosenbloom and Fadi Shaheen in support of Bruyea and affirmance. In it, the amici argued the tax Treaty “is not simply an expression of good will and general principles.” Instead, they say, the Treaty “is a painstakingly negotiated and carefully crafted legal instrument.” Thus, they continue, the construction of the treaty should “give effect to the shared expectations of the treaty partners,” which, they say, the lower court’s reading accomplished.
Oral argument is scheduled to be heard on Tuesday, March 3 at 10:00 a.m. in Courtroom 402.